Israel, Hamas agree to Gaza truce

A ceasefire between Israel and Hamas has officially come into effect after more than a week of violence in and around the Gaza Strip that has killed more than 150 people.

Israel and Hamas both ramped up their attacks in the final minutes before the ceasefire took effect at 9:00pm local time (6:00am AEDT), with Israel pounding targets in Gaza and Hamas launching a late flurry of missiles at southern Israel.

But as the truce took effect Palestinians took to the dark streets of Gaza to celebrate, firing guns into the air and blasting car horns. The sound of Israeli drones could still be heard overhead.

Speaking at a joint press conference in Cairo earlier, US secretary of state Hillary Clinton and Egyptian foreign minister Mohammed Kamel Amr announced the deal had been reached.

"The United States welcomes the agreement today for a ceasefire. In the days ahead, the United States will work with partners in the region to consolidate this progress," Ms Clinton said.

As the ceasefire began, Israeli prime minister Benjamin Netanyahu hinted that if the Egyptian-brokered truce did not work Israel would consider "more severe military action" against the Palestinian territory.

"I know there are citizens expecting a more severe military action, and perhaps we shall need to do so," he told a news conference as the ceasefire came into effect.

But a short time earlier, Mr Netanyahu's office had issued a statement saying he was prepared to give peace a chance.

"A short while ago prime minister Benjamin Netanyahu spoke with [US] president Barack Obama and agreed to his recommendation to give a chance to an Egyptian proposal for a ceasefire and thereby give an opportunity for the stabilisation of the situation and a calming of it," Mr Netanyahu's office said in a statement.

It won him praise from Mr Obama.

"The president commended the prime minister for agreeing to the Egyptian ceasefire proposal, which the president recommended the prime minister do, while reiterating that Israel maintains the right to defend itself," the White House said.

In Cairo, Hamas chief Khaled Meshaal said the deal called for all the border crossings between Gaza and Israel to be opened - not just the Rafah crossing between Gaza and Egypt.

"The [ceasefire] document stipulates the opening of the crossings, all the crossings, and not just Rafah," Mr Meshaal told a news conference in Cairo.

Palestinians celebrate

ABC Middle East correspondent Matt Brown spoke to ABC News Breakfast from Gaza after the ceasefire came into effect this morning.

He said there were wild celebrations in the streets after news of the deal broke.

"What was strong celebratory gunfire coming from all around the north of the Gaza Strip here just became a cacophony like tropical rain pouring down on a tarpaulin. There were people whooping in the streets, the sounds of obvious celebration," he said.

"There is a much more important longer term objective for Hamas that could have been achieved here, which is to open the border crossings to trade between Gaza and Israel.

"[That is] something that was a very significant part of the Gaza economy but which Israel really clamped down on after Hamas ceased control violently here in 2007."

He said Egypt's key role in brokering the truce was a significant sign of a shift in the power balance in the region.

"Egypt, in a new era, since the Arab Spring under the rule now the Muslim Brotherhood, the mother organisation of Hamas, played such an important role here," he said.

"We're hearing reports that Egypt played a role intercepting longer range rockets that were intended to be shipped from Libya into the Gaza Strip some time in the recent past.

"So Egypt always has played an important role, but very significantly now, given its relationship with Hamas, if this whole deal sticks the whole symbolism of Hillary Clinton, the US secretary of state, sitting there beside the Muslim Brotherhood president of Egypt and brokering this deal, shouldn't be lost on anyone in the Middle East.

"And everyone's crossing their fingers and hoping that this is the beginning of something that will last."

Panic in Tel Aviv

The agreement came after a day of shuttle diplomacy - led by Ms Clinton and UN secretary-general Ban Ki-moon - which was marred by more deadly cross-border violence between Israel and militants in Gaza.

Hopes for a truce appeared to have been faint just hours earlier after the attack on the bus in Tel Aviv.

The blast occurred very close to the Israeli defence ministry and was quickly denounced by Mr Netanyahu's spokesman, who tweeted: "This was a terrorist attack."

The windows of the bus were blown out and its seats contorted from the force of the explosion, in scenes reminiscent of the second Palestinian intifada.

"I am speechless. This is scary," said Sigalit, a 22-year-old waitress working nearby.

Condemnation poured in, with Washington branding it "outrageous", Moscow denouncing it as "criminal", and France and Germany calling for an urgent and lasting ceasefire in Gaza.

Soon after the bus blast, Israel launched fresh air strikes on Gaza City, killing six Palestinians in attacks which raised the day's toll to 10, medics in Gaza said.

Speaking to ABC News Breakfast from Ashkelon in southern Israel this morning, ABC correspondent Philip Williams said both sides were claiming victory after the ceasefire.

But he said the attack on the bus in Tel Aviv had come as a "big shock" to people in Israel's largest city.

"This is really a return to the past and it really shook people up," he said.

"It's been six years since there's been a bomb on a bus in Tel Aviv. They got used to feeling secure about the bus system. It looks like one person threw probably a pipe bomb or something like that, not a very sophisticated weapon, into the bus, got off and ran.

"Really what people were worried about is that might even derail the peace process. It was everyone's assumption almost that there would be no peace deal today because of that attack, because it ramped up the pressure on the Israelis not to be seen to be doing a deal on that sort of day.

"But fortunately that deal is done and it is holding.

"It might be worth adding that, while obviously very many Israelis are very happy this is all over, there are still many that would want a land invasion, particularly in this area, and want Hamas wiped out once and for all, and will be disappointed with this.

"But the general feeling I would imagine would be that there was some relief that the troops don't have to go in, because inevitably that would have meant casualties on both sides, high casualties."

Today Australian Foreign Minister Bob Carr welcomed the ceasefire deal and hailed the role Egypt's president Mohamed Morsi played in brokering it.

"One of the things that stands out is the leadership role of someone who could be a very great figure in Middle Eastern history indeed - and that's President Morsi of Egypt," he told reporters in Canberra.

"I rang the Egyptian ambassador in Australia today to ask [him] to convey to Cairo our support, our admiration for the leadership role that Egypt has demonstrated.

"It is brave for Israel and brave for Palestinians to make this commitment given the level of hostility that the recent flare-up in fighting level conflict has demonstrated.

"So we commend brave leadership and we urge them to make further commitments, brave commitments, to peace in the Middle East."

Ceasefire agreement

Israel should stop all hostilities in the Gaza Strip's land, sea and air, including incursions and targeting of individuals.

All Palestinian factions shall stop all hostilities from the Gaza Strip against Israel, including rocket attacks and all attacks along the border.

Opening the crossings and facilitating the movements of people and transfer of goods and refraining from restricting residents' free movements and targeting residents in border areas and procedures of implementation shall be dealt with after 24 hours from the start of the ceasefire.

Other matters as may be requested shall be addressed.

Implementation mechanisms

Setting up the zero hour for the ceasefire understanding to enter into effect.

Egypt shall receive assurances from each party that the party commits to what was agreed upon.

Each party shall commit itself not to perform any acts that would breach this understanding. In case of any observations Egypt as the sponsor of this understanding shall be informed to follow up.